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LenaWriter [7]
3 years ago
8

Phips Co. purchases 100 percent of Sips Company on January 1, 20X2, when Phips' retained earnings balance is $320,000 and Sips'

is $120,000. During 20X2, Sips reports $20,000 of net income and declares $8,000 of dividends. Phips reports $125,000 of separate operating earnings plus $20,000 of equity-method income from its 100 percent interest in Sips; Phips declares dividends of $35,000. Based on the preceding information, what is Phips' post-closing retained earnings balance on December 31, 20X2?
Business
1 answer:
Taya2010 [7]3 years ago
3 0

Answer:

Phips' post-closing retained earnings balance on December 31, 20X2 = $577,000

Explanation:

Note: When 100% shares of a company is acquired it is treated as subsidiary and for its accounting equity method is used.

In that case all balances of subsidiary are added to balances of Parent company.

But if any dividend is received then such value is deducted from carrying value of investment, and any share in profit will be added to carrying value.

All the retained earnings balance is accumulated together of both companies.

Therefore closing balance shall be

Retained earnings balance of Sips at year end

= $120,000 + $20,000 - $8,000 = $132,000

Year end balance of Phips Alone

= $320,000 + 125,000 = $445,000

Total Retained Earnings at year end = $132,000 + $445,000 = $577,000

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4 0
3 years ago
Bailey Co. changed their accounting for insurance expense from the cash-basis to the accrual-basis in the current year. In Janua
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Answer:

$60,000

Explanation:

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3 0
3 years ago
Read 2 more answers
A seller listed a home for $200,000 and agreed to pay a commission rate of 5%. The MLS stated that the commission would be share
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Answer:

The selling sales associate received $2,700

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4 0
3 years ago
If you know that the value of an asset is $100 today, what concept will tell you what it will be worth in 5 years given a certai
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Answer:

future value

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Future value is the value of a sum of money at some point in the future given a  certain interest rate.

Formula for future value = present value x ( 1 + r )^n

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A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expect
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<em>$18.29</em>

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<u><em>Good Luck.</em></u>

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